July 17, 2017

Substantial 100 Day-gains avert US-China trade war for time being

A Ming Pao Daily (Chinese-language 明報)editorialof 17 July 2017 suggests that substantial 100-Day gains may augur well for a positive outcome in the upcoming (19th July) U.S.-China Comprehensive Economic Dialogue in Washington-D.C. These gains are derived from an agreed listof quid pro quo liberalizations following the Mar-a-Lago meeting between President Trump and President Xi.

The editorial points out that since 1979, US-China trade has increased 270 times. US export to China has helped generate 910,000 American jobs in 2015. Oxford Economics data suggest that in the same year, import from China increased US GDP by 0.9%, supporting 1.8 million US jobs. Similarly, export to the US in 2015 accounted for 20 million Chinese jobs.

The combined US-China GDP represents 40% of the world's, US-China trade accounts for a quarter of global trade, and total Foreign Direct Investments (FDI) and Outbound Direct Investments (ODI) amount to a third of the global total. So US-China economic relationship is simply "too big to fail", according to the editorial.

Early harvest of the 100-Day deal includes the import of US beef to China, substantial progress in safety tests of US bio-technology imports, and license issuance for US e-commerce operators and bond issuers in China. In particular, the first five months in 2017 saw dramatic upsurge of US oil exports to China, amounting to 100,000 barrels a day, ten times more than last year. This paves the way for similar expansion of American Liquefied Natural Gas (LNG) exports to China, a commodity in abundance as a result of the US "shale gas revolution".

Moreover, the RMB, the Chinese currency and China's foreign currency reserve have reversed into an upward trend, debunking accusations of currency manipulations to boost China's exports. So the prognosis seems positive for a US-China Bilateral Investment Treaty (BIT), if the Trump administration is able to de-link economic relations from geopolitical rivalry with China and the unrealistic hope of using trade to force China to solve the North Korea problem.